Industrial production dips to nine-month low of 1.2% in May

IIP for May

India’s industrial production declined to an nine-month low of 1.2 percent in May compared with 2.6 percent in the previous month, as excess rains weighed on performance of two main sectors, according to data released on June 30.

"The early onset of the monsoon doused activity in mining and the demand for electricity, with both these sub-sectors of the IIP reporting a contraction in May 2025, amidst an anemic growth of manufacturing," said Aditi Nayar, chief economist, Icra.

The decline in industrial production corresponds with a dip in core sector performance. Core sector growth slumped to a nine-month low of 0.7 percent in May from 1 percent in the previous month.

Electricity sector witnessed the steepest decline in five years, contracting 5.8 percent. Manufacturing sector slowed to a nine month low as well, while mining performance stayed subdued.

Mining sector decelerated for a second consecutive month with 0.1 percent decline compared with 0.2 percent in May 2025.

On the use-based classification, three of the six sectors witnessed a contraction, with primary goods sector contracting 1.9 percent from 0.2 percent in the previous month.

Consumption performance also slipped on the back of a high base, as consumer durables contracted 0.7 percent compared with 6.2 percent growth in the previous month.

"From the consumption perspective, weakness in output of consumer non-durable goods has persisted. Moreover, growth in consumer durables has slipped into the negative territory following encouraging growth in the preceding months. Several factors such as easing food inflation, policy rate cuts and favourable prospects for monsoon are playing out positively for the consumption scenario. These should aid in strengthening the overall demand in the economy. Demand recovery in both the urban and rural segments remains critical," said Rajani Sinha, chief economist, CareEdge.

Non-durable growth remained in contraction for a fourth consecutive month at -2.4 percent in May compared with -2.7 percent in the previous month.

Infrastructure and capital goods sector performed better on the back of rising spending from the central government. Capital goods growth was higher at 14.1 percent compared with 14 percent in the previous month, whereas construction industries rose from 4.7 percent to 6.3 percent.

In May, the pace of capex spending continued, with the government spending 19.7 percent of the Budget compared with 12.9 percent in the previous month.

India’s economic activity is likely to slowdown in the first quarter of the year, compared with 7.4 percent growth witnessed in the fourth quarter of FY25.

"Tepid industrial volume growth in the first two months of the quarter doesn't augur well for industrial GVA growth in Q1 FY2026," said Nayar.

"The daily power generation fell 2.1 percent yoy in June 2025 (as on 29 June), mirroring weak power demand similar to the previous month. This may keep the factory output growth around 1.5 percent yoy in June 2025, in Ind-Ra’s view," said Paras Jasrai, associate director, India Ratings and Research.